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OBOR: China's economy faces slowdown, needs bigger push to grow; India toughens its stand on Dragon's Border and Road Project

India has kept away from China's Border and Road Forum due to its sovereignty concerns over the USD 50 billion CPEC, which passes through PoK. India's absence has not gone unntoiced. Let's understand why China is desperate for OBOR, and what are the challenges it faces at present:


By   |  Updated On : May 17, 2017 06:19 PM
One Belt One Road: China's economy faces slowdown, needs bigger push to grow; India toughens its stand on Dragon's OBOR Project

One Belt One Road: China's economy faces slowdown, needs bigger push to grow; India toughens its stand on Dragon's OBOR Project

New Delhi :  

India has boycotted China's dream project One Belt One Road (OBOR) and registered its protest over the multi-billion dollar China-Pakistan Economic Corridor (CPEC) traversing through Pakistan-occupied Kashmir (PoK) despite Beijing's pressure to ensure New Delhi's participation in the high-profile plan.

The Belt and Road Forum (BRF) initiative includes a maze of roads and port projects that include the CPEC, the  Bangladesh, China, India and Myanmar (BCIM) Economic Corridor, New Eurasian Land Bridge, China-Mongolia-Russia Economic Corridor, China-Indochina Peninsula Economic Corridor and 21st century Maritime Silk Road.

Read | India skips China's BRF summit ceremony following sovereignty concerns over CPEC

India skipped the meeting due to its sovereignty concerns over the USD 50 billion CPEC, which passes through PoK. No Indian official of any level was present at the elaborate opening ceremony attended by 29 heads of state and government along with top officials of the world bodies like the UN, the World Bank and the IMF. 

#MEA response to a query on participation of India in #OBOR forum in China pic.twitter.com/FzqjsrpCQZ

— Pratyush Ranjan (@pratyush_ranjan) May 15, 2017

Pakistan Prime Minister Nawaz Sharif, Sri Lankan Premier Ranil Wickramasinge, Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan were among the world leaders who attended the meeting inaugurated by Chinese President Xi Jinping on Monday.

Skirting any references to India's absence at the meeting, Xi Jinping, in his address after inaugurating the Summit, said all countries should respect sovereignty.

Xi said the Belt and Road initiative is "a project of the century" that will benefit people across the world.

Dismissing assertions that the initiative was aimed at forming a "small group" of nations taking part in the One Belt and One Road (OBOR) venture, Xi said China plans to build it as a road to peace and link his country to much of Asia, Europe and Africa.

Read | China invites India to OBOR summit, says CPEC has 'no direct link' with Kashmir issue

Let's understand why China is desperate for OBOR, and what are the challenges it faces at present (With inputs from a report published in Indian Express) - 

1. China has recently reduced its GDP growth target to 6.5%. It's the lowest GDP growth projection in the last 25 years. With a global slowdown in 2017 and similar pedictions for world economy in the coming years, China desperately needs a new model of development to maintain its economic success story. 

2. The OBOR project has plans to create largescale infrastructure opportunities in China and other countries involved, and all member countries have high hopes that the project will keep theie economy booming. 

3. The main three reasosns behind China's OBOR launch are - 

(a). Slowdown in China's exports, its investments and consumption in domestic markets, 

(b). A change in US policy after Donald Trump’s victory, 

(c). Rise of protectionist trends in the West, which has resulted in shrinking markets. 

4. Investments in China have gradually reduced due to increasing labour costs, massive traffic on roads, and dangerous air pollution and environment concerns. 

5. The consumption rates in China have decreased with slower growth of the middle class income group. 

6. With OBOR, China thinks there will be a tactonic shift from developed markets in the West to developing economies in Asia. China has also changed its development strategy and started concentrating on provinces in Central and Western China instead of the developed east coast region.

7. China has plans to establish trade-links from its eastern (developed) parts with the US and other developed countries, while the central and western provinces, which have witnessed minimal growth, will feed Asia’s developing countries. 

8. A major hurdle for OBOR at present is the lack of infrastructure in South and Southeast Asia to push trade.

9. India, one of the fastest growing economies of the world, has refused to join OBOR due to its objections over the geographical location of the CPEC projcet involving Pakistan and China.

10. OBOR also requires the construction of international trunk passageways and an infrastructure network connecting all sub-regions in Asia, and between Asia, Europe and Africa.

11. The Biggest roadblock in OBOR is that several countries along the Silk Road have not yet established a market economic system, and that their domestic markets need more regulation and infrastructure. 

12. With OBOR, China’s experience and expertise in building infrastructure and connectivity will be given access to many developing countries in South Asia, which it needs badly. 

13. There are many infrastructure companies in China and there is a sort of over-capacity as well. China wants to use this resource in many developing countries.

14. China desperately needs OBOR project in place to go for much-needed 'domestic readjustment' to shift the focus from the developed east coast provinces to less developed regions of the central and western provinces.

China's stand on India's concerns

India has been severely critical of the CPEC, saying the project violates its sovereignty as it runs through Pakistan-occupied Kashmir.

Seeking to allay India's concerns, China has offered to rename the China-Pakistan Economic Corridor (CPEC) which passes through PoK, insisting it was an economic cooperation and connectivity enhancement project devoid of "sovereignty issues".

Chinese ambassador to New Delhi Luo Zhaohui, while referring to frosty Indo-Pakistan ties, said China was willing to mediate to resolve the differences between the two countries if it was acceptable to both sides.

Read | CPEC master plan revealed: China to make in roads in Pakistani economy and culture like never before

(i) On CPEC
Referring to the CPEC, which is part of OBOR, he said China has no intention to get involved in the sovereignty and territorial disputes between India and Pakistan and that the project is for promoting economic cooperation and connectivity in the region.

"It has no connections to or impacts on sovereignty issues. Even we can think about renaming the CPEC. China and India have had successful experience of delinking sovereignty disputes from bilateral relations before," he said in closed-door address to a think-tank.

(ii) Bigger economy
Luo said China is sincere in its intention to cooperate with India on the OBOR as it is "good for both of us."

Maintaining that China and India could be natural partners in connectivity and the OBOR, the Chinese ambassador said Indian economy was behind China by at least 13 years, suggesting New Delhi should grab economic opportunities offered by Beijing.

"Now the GDP of India is roughly that of China in 2004, some 13 years ago. China leads India by 13 years mainly because we started reform and opening up 13 years earlier," he said.

(iii) Pro-Pakistan Policy
Referring to the view in India that China always puts Pakistan first when handling its relations with South Asian countries, he said the government always follows "China first" policy and that problems are dealt on merit.

"I want to tell you this is not true. Simply put, we always put China first and we deal with problems based on their own merits. Take Kashmir issue for example, we supported the relevant UN resolutions before 1990s. Then we supported a settlement through bilateral negotiation in line with the Simla Agreement. This is an example of China taking care of India's concern," he said.

On India's bid for the membership of the Nuclear Suppliers Group (NSG), he said, "We do not oppose any country's membership, believing that a standard for admission should be agreed upon first."

(iv) India's 'Act East Policy'
The envoy also proposed a four-point initiative to improve ties between India and China which includes aligning its 'OBOR' project with India's 'Act East Policy', and restarting negotiations on a free trade pact.

(v) Other Bilateral issues
China has put forward proposals which include starting negotiations on a 'China-India Treaty of Good Neighbourliness and Friendly Cooperation' and prioritising finding an early solution to the border dispute between the two countries.

- Negotiation on a China-India Treaty of Good Neighbourliness and Friendly Cooperation

- Restarting negotiation of China-India Free Trade Agreement

- Strive for an early harvest on the border issue

- Actively explore the feasibility of aligning China's 'One Belt One Road Initiative' (OBOR) and India's 'Act East Policy'


India toughens its stand against China on many issues

1. Despite China's presence in PoK, India actively participated in the Asia Infrastructure Investment Bank (AIIB), the BRICS Development Bank and the Shanghai Cooperation Organisation (SCO). All these initiatives are led by China. 

The SCO is a multilateral institution and members have an important say in its policies. 

But, the OBOR initiative does not fit into this structure. India had conveyed to China that a similar consultative process was even more important for such an ambitious undertaking. 

2. China wanted India to first sign on to the initiative before getting into the specifics of India’s role, the choice of projects and financing matter. 

3. India’s refusal to attend the Chinese-organised OBOR conference is just one instance in recent months where Prime Minister Narendra Modi seems to have adopted a 'less tolerant' approach towards China.

- Prior to this, the BJP-led Government allowed a visit to Arunachal Pradesh by then American Ambassador to India, Richard Verma, in October 2016. 

- The Modi government also allowed the Tibetan spiritual leader the Dalai Lama to visit Arunachal Pradesh in April. Beijing vehemently protested against India's decision ahead of the Dalai lama's visit to Arunachal. 

- President Pranab Mukherjee also met the Dalai Lama at an event hosted to honour him at Rashtrapati Bhavan in December last year.

- India is also upset with Beijing creating hurdles for India’s entry into the Nuclear Suppliers’ Group at least twice in 2016. 

For a major economy like India, it would be difficult to play No.2 to China in South Asia. And even if it decides to join OBOR, it cannot afford to be a junior partner in its own region.

India has taken a principled as well as a strategic call on OBOR, and it should stick to it.

To tackle China's OBOR challenge, India needs to speed up its own infrastructure projects and find ways to strengthen its influence in South Asia region by increasing internal connectivity, modernising connectivity across its land and maritime borders with neighbouring countries and working with multilateral institutions to develop regional connectivity in the Indian Subcontinent and beyond. 

In the process, India is trying to use energy as a means of diplomacy in a very different way in South Asia region. From Indonesia to Mauritius, Myanmar, Sri Lanka, Bangladesh, Mauritius and Nepal, India is working on a web of energy relationships that seeks to leverage India's position as a big source of petroleum products, sharing of technology and building inter-dependencies.

For the Narendra Modi Government, the task ahead is not easy but it’s well within the realms of possibility for India with well-timed strategic decisions to emerge as a stable economic counterweight to China. 

Here are two videos about the strategic decisions India has already taken to counter rising Chinese influence in the region. 

Video: How India, Iran & Afghanistan are countering Pak-China CPEC

Video: While China is still planning OBOR, India completes India Eurasia road



(With inputs from PTI and various reports on OBOR published in different news website)


This article does not necessarily reflect the opinion of the editorial team of News Nation.

First Published: Tuesday, May 16, 2017 08:12 AM
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